LAGOS (Capital Markets in Africa) – Africa Finance Corp (AFC), a pan-African multilateral institution based in Nigeria, is likely to make a debut U.S. dollar sukuk issue by early February, banking sources close to the deal said on Wednesday.

If AFC makes a final decision to go ahead with the proposed debt sale over coming days, the sukuk will be issued in two or three weeks through a private sale, a banking source familiar with the transaction said.

At least one of the banks arranging the transaction is based in the United Arab Emirates, the source added. A spokeswoman at AFC declined to comment.

A private placement normally requires less documentation than a bond listed on a public exchange.

The sukuk would be structured with a murabaha format, a popular cost-plus structure in Islamic finance, and use Nasdaq Dubai’s platform for murabaha transactions, according to a report by Moody’s Investors Service, which assigned a provisional A3 credit rating to the Cayman-domiciled special purpose vehicle.

“We will see more sukuk issuance from Africa-based issuers over the next few years” as borrowers seek to expand their investor bases, said Dr. Mohamed Damak, global head of Islamic finance at S&P Global Ratings.

“Another reason for issuers in Africa to choose the sukuk route is that sometimes sukuk can be cheaper than (conventional) bonds in terms of cost of funding, especially when it attracts significant interest from the market.”

AFC obtained a 15-year, $50 million line of financing from the Saudi Arabia-based Islamic Development Bank [ISDBA.UL] in 2015. It issued a debut $750 million conventional bond in 2015, a five-year deal that offered a 4.375 percent coupon.

Last year it issued a 100 million Swiss franc bond. That paper, with a maturity of three years and 150 days, pays a 0.85 percent coupon and was arranged by Deutsche Bank and UBS.